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The FDIC isn't slow on lawsuits over bank failures

Thursday, March 17, 2011; 6:58 PM

The March 15 Economy & Business article "FDIC too slow to sue officers and directors at failed banks, critics say," by Ben Hallman of the Center for Public Integrity, criticized the Federal Deposit Insurance Corp.'s pace of filing lawsuits arising from bank failures. The piece left out the broader context of the financial regulatory structure and the purpose of these lawsuits.

Mr. Hallman's "critics" seem to suggest that wasting time and money filing lawsuits to arbitrarily meet a quota is more important than a thorough examination of the likelihood of success. On this point, while the piece noted that the statute of limitations on these lawsuits is three years, it omitted the fact that there were only 25 bank failures in 2008. Indeed, failures peaked just last year, at 157. The FDIC completes most investigations within 18 months of a bank failure, and the products of many of those investigations are now coming to the fore. By the end of March 2011, the FDIC will have authorized lawsuits against 158 defendants, with potential recoveries of $3.57 billion. More to the point, these are based on actual investigation and threshold standards, as opposed to living up to an unrelated number for the S&L crisis.

The article's transition into criticism of the FDIC's supervisory approach was similarly cursory. The action of revoking a financial charter is performed by an institution's federal or state chartering authority, not the FDIC. The article confusingly intermingled the FDIC's role as receiver for all institutions and our supervisory responsibilities.

Andrew Gray, Washington

The writer is director of public affairs at the FDIC.

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